Satyajit Das: India’s new rulers won a mandate for change. That was the easy part

Das Capital: Narendra Modi could join an illustrious line of political leaders who do not live up to their promise

Click to follow
The Independent Online

The conservative Bharatiya Janata Party (BJP) won a convincing victory in this year’s Indian election. It gained 282 out of 543 seats in the lower house  and, in conjunction with its allies, will control 333 – an unprecedentedly comfortable majority in India’s generally fractious coalition politics.

The win was based on appeals to Hindu chauvinism and the young, increasingly urban classes (India’s “selfies”). The electorate was tired of corruption, lack of progress and incompetent leadership, and resistant to the perpetuation of the Nehru/Gandhi “sexually transmitted democracy” (a phrase coined by the writer William Dalrymple). A tired, ineffective and dysfunctional Congress-led government had conceded defeat a long time ago, unwilling to waste political capital in what they saw as a lost battle. But it remains to be seen whether the new regime can bring about much-needed change.

The BJP only won 31 per cent of the vote, Congress 19 per cent. The Government does not have a majority in the Indian upper house, commanding only 63 of the 250 seats that are elected by the state and territorial legislatures  or nominated by the President of India for their contributions to art, literature, science, and social services. The BJP will have to work with the upper house to pass legislation related to the constitution, tax and foreign investment.

The new Government will also have to work with India’s many state governments on matters outside its jurisdiction. Foreign faith in its ability to reinvigorate infrastructure investment misses the point that matters like land acquisition are the responsibility of Indian states. Analysis by JP Morgan of the 50 largest stalled projects found that 55 per cent were being delayed due to state issues and another 25 per cent by problems of access to raw materials, controlled by government-owned but independent entities such as Coal India.

Narendra Modi’s new Government also wants to raise more than $10bn (£6bn) through the sale of state assets in order to plug the budget deficit. However, it is unlikely to sell controlling stakes in state enterprises, not least for fears of how people will react to any attempts by foreign investors to streamline businesses and announce redundancies. The first state sell-off – reducing India’s stake in the steel authority Sail – is expected next month, but even that will only see the holding fall from 80 to 75 per cent. Sales of 5 per cent stakes in Coal India and Oil and Natural Gas Corp could then follow, raising about $5bn.

The Government will also have to deal with a bureaucracy resistant to change and an independent central bank led by a formidable governor.

India appears to have chosen Mr Modi, rather than the BJP; the Government’s political and technocratic talent pool remains unknown and untested. Meanwhile India’s parliament remains, as ever, the province of dynastic politicians, celebrities, the rich, and alleged criminals. In this election,  17 per cent of assessed candidates faced criminal charges, including for rape or murder.

The BJP will also have to deal with internal tensions that surfaced during the election campaign, dividing the spoils of victory. And it will have to reward others instrumental in its success. Despite oft-repeated campaign mantras about the tea-seller’s son, Mr Modi’s party spent an estimated $500m to $700m on its election campaign, presumably financed by wealthy business backers. These interests are rarely interested in long-term structural reforms. They favour market-driven artificial wealth, based on preferential access to government contracts, fast tracking of approval for their projects, access to national resources like land, and spectrum at favourable prices.

On important issues, they have significantly different views, which will complicate policy making. In manufacturing, some believe that India has no future and should not seek to compete. Others favour hi-tech manufacturing. Another group favours labour-intensive, low- tech industries such as clothing, leather and food processing. All groups agree, however, that the Government should subsidise their preferred strategy.

Interestingly, Mr Modi’s desire for accountability and transparency did not extend to detailing contributions to the BJP’s coffers. It did not follow the example of the small Aam Aadmi Party, which discloses every donation received on its website. That Aam Aadmi only won four seats does not suggest that the electorate or the big political players are interested in addressing India’s electoral funding system.

Mr Modi’s Hindu nationalist philosophy and alleged complicity in the anti-Muslim Gujarat race riots of 2002 may prove divisive. It is estimated that only around 10 per cent of India’s substantial Muslim population voted for the BJP. During the campaign, leaders of one radical Hindu organisation affiliated with the BJP argued that Indian Muslims should not be allowed to buy properties in Hindu areas. Mr Modi disapproved of the statement. However, in Gujarat, the state where Mr Modi was chief minister, there is strong evidence of Muslim marginalisation.

His decision to celebrate his victory with a Hindu religious ceremony was a poor signal for a harmonious, secular India.

These factors will detract from social cohesion, important for economic development. It may also increase tensions with Islamic neighbours.

As the Conservative politician Enoch Powell once accurately observed: all political careers end in failure. It will be interesting to see if Mr Modi can bring about the change he has pledged, or whether he joins an illustrious line of Indian political leaders who did not live up to their promise.

Satyajit Das is a former banker and author of ‘Extreme Money’ and ‘Traders, Guns & Money’